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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Brookfield Business Partners LP    BBU.UN   BMG162341090


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Delayed Quote. Delayed Toronto Stock Exchange - 03/22 04:00:00 pm
48.46 CAD   -2.08%
03/16Brookfield Business Partners Completes Annual Filings
03/16Debt Sale Hints at Market Rebound -- WSJ
03/1510 Billion Corporate Debt Sale Highlights Credit Market's Recovery--Update
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10 Billion Corporate Debt Sale Highlights Credit Market's Recovery

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03/15/2019 | 06:15am EDT

By Sam Goldfarb and Soma Biswas

The world's largest maker of automotive batteries is set to sell more than $10 billion worth of speculative-grade debt Friday to fund its purchase by an investor-group led by Brookfield Business Partners LP, underscoring the recent resurgence in demand for low-rated bonds and loans.

Power Solutions, the automotive-battery business currently owned by Johnson Controls International PLC, is poised to sell roughly $3.7 billion worth of secured and unsecured bonds, denominated in both dollars and euros, along with around $6.5 billion in loans, also split between euro and U.S. dollar tranches.

The long-anticipated sale is on track to be relatively easy for a large group of underwriting banks, as investors have eagerly embraced what many see as a stable business that is able to shoulder the large amount of debt being placed on it.

The expected completion of the Power Solutions deal is a testament to the improved tone in high-yield debt markets, several investors said. Though fears of an economic slowdown led to a sharp decline in bond and loan sales in the final months of 2018, issuance picked up in the middle of January and has been fairly steady since then.

Through Wednesday, businesses had sold a total of $106.9 billion of speculative-grade bonds and loans this year, according to LCD, a unit of S&P Global Market Intelligence. That is down from $162 billion in the same period last year.

After a lengthy roadshow, banks this week were able to cut the expected yields on all of the bonds and loans, an indication that demand had well outstripped supply, investors said. They were also able to increase the size of the loan portion of the deal by $1 billion while decreasing secured bonds by the same amount. That was a positive sign for private equity-backed companies that typically prefer to borrow in loans because they are usually easier than bonds to repay ahead of their scheduled maturities.

Among the multiple pieces of the debt package is an expected $1.95 billion worth of unsecured bonds due 2027, which investors late Thursday were anticipating will initially yield around 8.5%, down from original guidance of roughly 9.25%. JPMorgan Chase & Co. was the lead underwriter for the secured dollar bonds and loans, while Barclays PLC led marketing of the euro debt and Credit Suisse Group AG was the lead underwriter of the unsecured dollar bonds.

Some investors cautioned that the likely success of the Power Solutions deal doesn't necessarily mean other businesses will find it as easy to sell such a large amount of debt in the current market. Even using conservative assumptions, analysts expect the company should be able to generate ample free cash flow in the coming years. Its secured bonds and loans, in particular, appealed to investors who have been eager to buy debt at the higher end of the speculative-grade ratings scale.

Not everything about the deal pleased investors. Prospective buyers were able to make some changes to the package of investor protections, known as covenants, an unusual outcome for such an in-demand deal. Yet the result, some said, still gives the company's owners plenty of room to pay themselves dividends and remove collateral from the business, in keeping with the long-term trend toward weaker covenants.

Johnson Controls, an industrial and technology conglomerate with headquarters in Cork, Ireland, announced in November it was selling Power Solutions to the Brookfield Business Partners-led group for $13.2 billion in cash. The deal is expected to close by June 30.

Write to Sam Goldfarb at sam.goldfarb@wsj.com and Soma Biswas at soma.biswas@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BROOKFIELD BUSINESS PARTNERS LP -2.08% 48.46 Delayed Quote.16.55%
JOHNSON CONTROLS INTERNATIONAL -2.25% 36.13 Delayed Quote.21.86%
JOHNSON CONTROLS INTERNATIONAL 1.27% 32 Delayed Quote.25.00%
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03/18BROOKFIELD BUSINESS PARTNERS LP : Completes Annual Filings
03/16Brookfield Business Partners Completes Annual Filings
03/16Debt Sale Hints at Market Rebound -- WSJ
03/1510 Billion Corporate Debt Sale Highlights Credit Market's Recovery--Update
03/1510 Billion Corporate Debt Sale Highlights Credit Market's Recovery
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Cyrus Madon Chief Executive Officer
Jeffrey Miles Blidner Chairman
Jaspreet Dehl Chief Financial Officer
Peter Poolsaar Chief Information Officer
John Stewart Lacey Lead Independent Director
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